September 11th Attack and Wage Levels

Since the September 11th attack there has been an increase in the demand for security personnel: police, air marshals, airport security, etc. How do you think the higher demand has affected the equilibrium wage? In which direction do you think the labor supply and demand shifted? Explain your reasoning.

Solution Preview

The equilibrium wage rate is the price of labor services, is determined in the labor market. The higher demand for security personnel means the demand for security personnel shifts to the right, in other words for the same labor higher wages are offered. The supply at least in the short run remains stable and there is a movement along the upward rising part of the labor supply curve. Statistical evidence shows that increase in the demand for security personnel leads to an increase in the wages of unskilled labor. However, in this case there will be several unemployed persons who will obtain the required training and join the security services.

In the time it takes unemployed ...

Solution Summary

This solution reviews the concept of equilibrium wage. It asserts that the equilibrium wage has been affected by the events of the September 11th attack. This solution is 470 words.